Period  2Q13/1H13

Actual vs. Expectations  Reported 2Q13 core net profit of RM353.3m, bringing 1H13 core earnings to RM713.8m. This is generally within expectations, at 48% and 47% of our FY13 full-year estimates and market consensus’.

Dividends  A 15.0 sen NDPS was declared (ex-date: 06/09/2013; payment date: 20/09/2013), same quantum paid in 2Q12.

Key Results Highlights  Headline net profit in 2Q13 was RM944.9m which included a RM591.6m investment tax allowance granted for the Melaka RGT. Ex-EI, 2Q13 core earnings slid 2% QoQ to RM353.3m from RM360.4m despite revenue rising by 2% over the quarter. This was mainly attributable to share of associates income, which swing to a loss of RM0.9m compared to RM10.9m profit previously. This was in relation to the unrealised forex loss incurred by the Kimanis Power and Kimanis O&M.

 YoY, 2Q13 core earnings contracted 2%, although revenue rose 5% over the year. YTD, 1H13 core profit grew 3% to RM713.8m as revenue rose 2% over the period. Note that in 2Q12, PETGAS reported a RM100m disposal gain from the listing of GASMSIA (MP; TP: RM3.41).

 Operationally, the Melaka RGT, which came on stream end Jun reported RM17.4 revenue with a loss before tax of RM2.8m due to pre-operating expenses. Its gas processing unit meanwhile reported improved PBT margin of 56% in 1H13 vs. 51% in 1H12 due mainly to lower depreciation charges despite lower revenue. Likewise, the gas transportation division’s PBT margin inched up to 80% from 79% on higher utilisation. Utilities segment also posted improved PBT margin to 20% from 17% thanks largely to lower depreciation charges.

Outlook  2H13 is expected to be stronger as the Melaka RGT is operational. Meanwhile, PETGAS has yet to announce the Regas fee. We understand that GASMSIA and TENAGA (OP; TP: RM10.48) are still paying the old rates to Petronas for the new gas supply from the Melaka RGT.

Changes To Forecasts  No changes to our FY13-FY14 forecasts.

Rating   Maintain MARKET PERFORM

Valuation  TP is raised to RM20.77/SOP share from RM20.31/SOP share after adjusting for the TP of GASMSIA to RM3.41/share from RM2.94/share previously.

Risks  The delay in the commencement of Kimanis IPP and Lahad Datu RGT.

Source: Kenanga